Fundamental Overview
The USD has been unusually resilient this week despite lots of negative catalysts. The
US PPI and
Core CPI came in on the softer side which saw the market increasing the easing expectations from 24 bps before the data to 37 bps after.
Moreover, yesterday
Fed’s Waller delivered some surprisingly dovish comments saying that a rate cut could come in the first half of this year if the inflation data continues to show improvement and that a March cut cannot be completely ruled out.
The market pricing increased to 42 bps by year end as a result which is now much closer to the 50 bps projected by the Fed.
On the EUR side, the latest
Eurozone CPI came in line with forecasts although the Core measure remained pretty sticky around 2.7%. As a reminder, the
ECB cut the policy rate by 25 bps at the last decision bringing it to 3.00%.
The central bank removed the passage saying that “it will keep policy rates sufficiently restrictive for as long as necessary” implying that upside inflation risks have faded. The market sees a 95% probability of a rate cut at the upcoming meeting and a total of 97 bps of easing by year end.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD is consolidating near the 1.0335
resistance. From a risk management perspective, the sellers will have a better risk to reward setup around the major
trendline to position for further downside. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair couldn’t break above the key 1.0335
resistance zone even after the softer than expected US inflation data and the dovish comments from Fed’s Waller.
This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop back into the lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the major trendline targeting a break above it.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the 1.0260 level where the price got rejected from several times in the past weeks. The buyers will likely continue to step in around the support to position for a break above the resistance, while the sellers will look for a break lower to increase the bearish bets into new lows. The red lines define the
average daily range for today.
Upcoming Catalysts
Today, we have the US Housing Starts and Building Permits, and the US Industrial Production and Capacity Utilization.
This article was written by Giuseppe Dellamotta at
www.forexlive.com.
